SMM Nickel Market Daily Review (2013-6-3)

SHANGHAI, Jun. 4 (SMM) - In Shanghai, Jinchuan nickel prices were between RMB 105,200-105,300/mt in the morning session, while Russian nickel prices were between RMB 104,200-104,300/mt. The market remained cautious, and traders began to hold back goods in the afternoon as LME nickel prices soared, keeping transactions extremely muted.

It was reported recently that the SRB will purchase 30,000 mt of nickel reserves. But SMM confirmed that traders and nickel importers have not heard about that, and most traders believe spot market will be rarely affected even if the SRB purchases nickel reserves, because the purchase will be made from a few enterprises or overseas. Upstream enterprises understand that the SRB intends to purchase nickel reserves, but details are under discussion. They believe the reserves purchases will unlikely reach 30,000 mt, but much more than the volume purchased last year's end.

A most recent SMM survey shows 60% market players believe LME zinc prices will close this week at USD 15,000/mt, and are expected to reach USD 15,200/mt if economic data to be released soon come in positive. The US Labor Department announced last Thursday that the number initial jobless claims for the week ending May 25 increased by 10,000, to 354,000, compared to the 340,000 expected, and the number for the week ending May 18 was revised from 340,000, to 344,000, meaning the US job market deteriorated. The annualized US Q1 GDP rose 2.4%, which is revised downward from the initial data. Worse-than-expected US data pushed down the US dollar index, paring pressure for LME nickel prices. Besides, nickel prices will remain firm as large amount of capital was injected to the market. The nickel reserves purchase by the SRB will also caused some buyers to push up nickel prices.

40% market players believe despite LME nickel prices soared on Monday, they will roll back early gains soon due to the weak fundamentals, falling back to USD 14,700-15,000/mt. They based their opinion on the continuously climbing global nickel supply. Nickel output in Brazil in April was 6,839 mt, up 43.2% MoM, and up 32.8% YoY. The nickel project in Madagascar, jointly invested by Sherritt International, SNC Lavalin, Japan's Sumitomo and Korea Resources, will be put into production soon. The nickel project has a designed capacity of 60,000 mt/yr, and will produce 8,000-13,000 mt of nickel this year. Besides, domestic nickel expansions include the RMB 11 billion of nickel project by Yinyi Group in Zhanjiang, 5,000 mt/yr of nickel project by Xinjiang Nonferrous Metals. By May 30, LME nickel prices hit a new high of 180,492 mt. In this context, Xstrata closed its nickel mine in Austrlia; Norilsk also cut nickel ore output in Australia. But oversupply will continue to exacerbate given fierce market competition and sluggish downstream enterprises, so they believe nickel prices will hardly extend their increases.